Newly-appointed Bank of Zambia (BoZ) deputy governor for operations Dr Francis Chipimo says the central bank is still at the stage of consultation to refine the Depositors’ Insurance Bill to ensure that the challenges that arise from a failed financial institution are dealt with.

And Dr Chipimo says the BoZ have come up with a robust and progressive framework that looks at inflation, its causes and how best to deal with it.

In an interview, Dr Chipimo announced that BoZ was still at the stage of consulting stakeholders in refining the Depositors’ Insurance Bill to ensure that it was effective wherever financial institutions failed.

“We cannot sit and guarantee that an institution will not fail, what we must be worried about is what happens to the depositors, what happens to the financial system as a whole; would it be impaired if these things happen? And that’s really what our obligation is and we think the Depositors’ Insurance Bill will be an important step in making sure that we can manage these challenges when they do come. As you know, the legislative process is a very consultative process so whilst we do have a Bill, we are still in that stage where we are basically still consulting and we have received feedback, which we are now getting back to relooking some of the framework and the format that we have proposed in this Bill,” Dr Chipimo said on the side-lines of the just-ended 2019 Agricultural and Commercial Show.

“We do have draft Bill, I know we have had extensive discussions around it. That’s also important when you are dealing with institutions, which do fail. As I said, our importance is really to ensure that we can support the depositors and make sure that we look after their interests, if you like. So, the Depositor’s Insurance Bill I think is something that will help us in instances when institutions do fail. And in the market, the reality is that institutions will fail over time.”

And Dr Chipimo said the central bank had come up with a robust and progressive framework that looked at inflation from a broader perspective and how best to tackle its causes.

“So, we now have what we think is quite a robust, forward-looking framework, which forces to think about what are all the factors, which are moving inflation, what are the things, which we can control; monetary policy, which we do try to control and what are the things that we can’t control and how might these impact into inflation. So, if you look at inflation now, it’s going up, what has caused it to go outside of the range? Inflation really has moved from something like six per cent in 2018 around February to where it is now which is 8.6 per cent in June (to 8.8 per cent in July, 2019) and there really has been two big things that have moved it: we can see on the food side, those pressures really rise and then on the non-food side, very much bouts of depreciation in the exchange rate, adjustment in oil prices, these are I think the two big factors, which have seen inflation move up,” explained Dr Chipimo.

“I think, as you know, we have been trying to explain in our MPC (Monetary Policy Committee) statement, we have a forward looking monetary policy framework, which means that what we are trying to do is take measures, which will influence where we think inflation will be, effectively two years ahead. The government has given us a target, which is 6-8 per cent, we do our forecasts and take into account a whole range of information and when we have our forecasts, if we think it’s taking us off target, we will then have to take measures to bring it back within target.”